Avanti wins, but worries remain

May 10, 2016

London-based speciality satellite operator Avanti Communications received a very useful $29 million (€25.4m) contract for backhaul connectivity from cellular operator EE on May 9th. Avanti’s shares rose 10 per cent in early trading on May 9th (to 101p), but finished the day at 93p after profit taking.

The $29 million contract is a “multiyear” deal and Avanti do not say how long the contract will run. Last year, in the complete trading 12-month period, Avanti only saw $85 million of revenues, so the extra $29 million is useful even if spread over a number of years. Avanti will connect a large number of static and mobile sites to the EE network in the UK, using capacity on HYLAS 1 and HYLAS 2

However, Avanti has lost some 40 per cent of its already depressed value this year alone. Look back to a year ago and its price was 240p. The worry observers have is that over the past trading year the firm has suffered a cash loss of $62 million on that $85 million of revenue. In other words, it cannot sustain these losses for much longer. It is paying interest on its loans and debts of some $57 million a year.

Most satellite operators manage their assets with a ‘fill rate’ of better than 70 per cent. Avanti’s fill rate is lower than 30 per cent.

A trading statement for its Q3 is expected on May 16th and this should provide some extra colour on its current and anticipated sales progress.